September 6, 2020

The South Carolina Court of Appeals (“South Carolina Appellate Court”), in its opinion dated July 29, 2020, held: “We conclude Appellants may not use equitable estoppel to bind Weaver to the arbitration provision. Because no valid arbitration agreement existed between Appellants and Weaver, we affirm the denial of the motion to compel arbitration.”

The Underlying Facts

In early June 2016, Bonnie S. Walker (“Walker”) moved into Brookdale Charleston (“Brookdale”), a residential care facility. One evening six weeks later, Walker wandered out of the facility. Brookdale did not realize that Walker was missing from their care until around 7 a.m. the next morning, at which time they notified Walker’s family of her disappearance. When Walker’s granddaughter, Stephanie Walker Weaver (“Weaver”), and other family members arrived at the facility, they began a search of Brookdale’s grounds. Weaver went to an alligator-infested retention pond on Brookdale’s property, where she discovered her grandmother’s body, which had been maimed and dismembered by an alligator.

The residency agreement between Walker and Brookdale contained an arbitration provision subject to the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (2018) (“FAA”). Weaver was not a party to the agreement and there is no evidence she was aware of it. The arbitration provision purports that it “binds third parties not signatories to this Arbitration provision” including “family members, or other persons claiming through the Resident, or persons claiming through the Resident’s estate, whether such third parties make a claim in a representative capacity or in a personal capacity.”

Weaver brought a lawsuit in her personal capacity against Brookdale and others for negligence, negligent infliction of emotional distress, and intentional infliction of emotional distress. The defendants moved to dismiss Weaver’s complaint on numerous grounds and also moved to compel Weaver to arbitration based on the arbitration provision in the residency agreement between her grandmother and Brookdale. The trial court denied the defendants’ motions and the defendants appealed to the South Carolina Court of Appeals.

South Carolina Appellate Court Opinion

Equitable Estoppel

State law controls when an arbitration agreement may be enforced against someone who has not signed it. The defendants argued that equitable estoppel required that Weaver be bound by the arbitration agreement. Equitable estoppel estops a nonsigner from refusing to comply with an arbitration provision of a contract if (1) the nonsigner’s claim arises from the contractual relationship, (2) the nonsigner has “exploited” other parts of the contract by reaping its benefits, and (3) the claim relies solely on the contract terms to impose liability.

The South Carolina Appellate Court stated: “Weaver’s claims rely on general tort duties owed by Appellants to everyone, not any provision of the residency agreement … Weaver’s claims arise from the duties that arose when Appellants failed to locate Walker; called Walker’s family, including Weaver, to notify them of Walker’s disappearance; enlisted Weaver’s help in searching for Walker; and failed to warn her of the danger of the alligator pond that Appellants knew or should have known about when Weaver began searching for Walker. These duties do not flow directly from the residency agreement.”

The South Carolina Appellate Court further stated, “Weaver has not “exploited” or otherwise sought to enforce or benefit from the residency agreement, any more than a pedestrian run over by a truck has benefited from the contract for the purchase of the truck … Weaver has not “attempted to procure any direct benefit” from the residency agreement “while attempting to avoid its arbitration provision.””

The South Carolina Appellate Court concluded: “Equitable estoppel is “a theory designed to prevent injustice, and it should be used sparingly” … Born of equity, the heart of the theory “is that the party entitled to invoke the principle was misled to his injury” … There is no evidence Weaver misled Appellants; in fact, the only contact Weaver had with Appellants shown by the record was when she led them to the scene of her grandmother’s tragic demise. We also point out that in support of their motion of dismiss, Appellants state Weaver has not alleged Appellants were aware of her or had “purposefully directed any conduct towards” her. This portrayal of Weaver as a stranger to Appellants contradicts their depiction of her, in their equitable estoppel argument, as actively exploiting the residency agreement by looting its benefits. Equity does not reward irony.”

Source Weaver v. Brookdale Senior Living, Inc., Opinion No. 5752.

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